As EU's East-West Divide Is Bridged, A New Schism Opens Between North And South

BRUSSELS -- Not so long ago the ten newest European Union members from the east were seen as the bloc's poor cousins, lagging far behind their richer and more politically developed neighbors to the west.

But much has changed since former communist countries such as the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia joined the EU in 2004, followed by Bulgaria and Romania three years later.

As many of these countries have become wealthier, reformed their economies and public finances, and become more integrated into the union, they have become less inclined to vote as a bloc.

But as the once omnipresent East-West divide in Europe fades into the past, the current eurozone crisis has highlighted a new divide plaguing the continent -- one between the countries of the north, with their relatively healthy public finances, and the southern EU members, whose budgets are groaning under profligate spending and bloated state sectors.

And as one EU diplomat told RFE/RL, most of the EU's newer eastern members are proud members of the former club. "We are not Eastern Europe any longer, we are solvent Europe," the diplomat said.

Analysts say the eastern countries are now reaping the benefits of the painful structural reforms and budget discipline they were forced to enact in their drive to join the EU following the fall of communism.

Longtime southern member states like Greece and Italy, meanwhile, remained stuck in the spendthrift ways of a bygone era.

Frugal North, Sclerotic South

Fabian Zuleeg, the chief economist at the Brussels-based think tank the European Policy Centre (EPC), has noted that the willingness to reform in the eastern countries has put them in a similar situation to that of the frugal northern eurozone members, whereas in the south they are still grappling with their sclerotic economies.

"I think that one of the issues here is the legacy," he said. "They [the eastern countries] have large public debt. They have large public sectors with a lot of regulation which is stifling innovation. But I also think it is an attitude issue. The new member states are far more willing to change things to be able to come out from the crisis stronger than they were before"

Whereas government debt in the second quarter of this year was an astronomical 152 percent of gross domestic product (GDP) in Greece and 121 percent of GDP in Portugal, Poland kept it to 56 percent. Estonia, which boasts the strongest performing economy among the new members, has managed to cut its debt to as little as 6.2 percent of GDP.

In terms of growth, the new eastern members are also outperforming the troubled economies of the south. Estonia is expected to see its GDP grow by a very healthy 8 percent in 2011, for example, according to the European Commission's autumn economic forecast. Slovakia is expected to grow by 2.9 percent and Poland by 4 percent. The Greek and Portuguese economies, on the other hand, are expected to contract by 5.5 percent and 1.9 percent respectively.

Andres Kuningas, the head of the finance section at Estonia's EU embassy, maintains that the tiny Baltic country has always strived to keep its debt low. Tallinn also moved quickly to streamline its public sector when the 2008 financial crisis hit.

No Secret Recipe For Economic Health

Kuningas urged southern member states to stick to their reform plans and make their economies more flexible and competitive. He warned, however, that there is no silver bullet to provide a quick fix for ailing economies.

"There is no kind of secret recipe," he said. "I mean it is just pure economic sense. You have to follow it."

The situation today contrasts sharply with that following the 2008 global financial crisis, when new member states from Eastern Europe came under criticism for fiscal irresponsibility. Hungary and Latvia, who became the first members of the union to require a bail out from the International Monetary Fund (IMF) and the EU, received particularly harsh rebukes at the time.

Nonetheless, despite the fact that none of the newer member states have a GDP per capita that reaches the EU average, their response to the 2008 crisis contrasted well with the actions of several older EU member states.

While to various extents Greece and Portugal have found it hard to adopt austerity measures, many of the eastern states have rushed through actions such as severe cuts in the public sector, considerable pension reforms, and more private sector involvement in the health sector.

"If we remember the debate that occurred at the beginning of the economic and financial crisis in the autumn of 2008, then there were a lot of fingers pointing at Central and Eastern Europe," says Sweden's EU ambassador Dag Hartelius. "Today I think that the picture we have and the results that are coming out of economic data show that they, thanks to their processes of reform, stand on very solid foundations and in many ways are role models when it comes to how one can carry out structural reforms when needed."

A Changing Dynamic

The newfound respect these countries have earned in Brussels has demonstrably changed the dynamic in the union.

It is hard to imagine a situation where Eastern European leaders are treated like second class citizens, as in 2003 when French President Jacques Chirac told new members to "shut up" in the midst of a heated debate over the Iraq war.

Increasingly, as Hartelius explained, voices from the east are heard and -- more importantly -- respected.

"Those that can argue their corner well will be listened to," he said. "And if, in addition to that, you can show, as many of the new member states of Central and Eastern Europe can, a good economic development and good examples to point to, then you have an additional strength."

As a result, the EU's eastern members increasingly feel less compelled to vote together as a bloc against more established frontline states like France and Germany. Common positions on agricultural policy, environmental regulations, and foreign affairs are no longer the norm.

"From energy to agriculture, you will have big divergences within that group," says Piotr Maciej Kaczynski from the European Council for the Brussels-based think-tank, the Centre for European Policy Studies (CEPS). "And you will have big divergences within the union of 27 member states and the dividing lines go differently than east-west."

Estonia, for example, is reluctant to keep EU agricultural spending as high as Poland. Landlocked countries like the Czech Republic, Slovakia and Hungary are in opposition to the Baltic States on maritime policies.

One area where the East-West divide is still evident, however, is in the staffing of EU institutions. While the recently created European External Action Service -- the EU's foreign policy arm -- is balanced in its composition, the powerful European Commission is still dominated by older members.

"On the lower level...about half of all the personnel in the European Commission are coming from the newer member states," Kaczynski said. "On the [decision-making] level, heads of units, directors, director generals, it is something between one and five percent."